Gold is the ultimate tender. The yellow metal is considered to be one of the most liquid assets in the world. The reason for this is simple - it is accepted as a universal currency and finds a buyer in virtually any corner of the earth.

So, when you do wish to borrow in case of an emergency, the yellow metal provides the easiest option. The traditional way of borrowing has been pledging your ornament to the jeweller and borrowing from him. The jeweller keeps the ornament with him and lends you a certain amount, depending on the valuation. Typically, he would lend you an amount equivalent to 50% of the value of gold you pledge with him and charge you a hefty rate of interest. The rate of interest could start from 30% and go to as high as 50%.

However, today there are several different options available to investors. Investors can avail gold loans from private sector banks such as HDFC Bank, ICICI Bank or even from NBFCs. Manappuram Finance and Muthoot Finance specialise in gold loans and claim to offer you quick loans with minimum documentation.

All you need is either of these - a voter ID, passport, ration card or driving licence, and you could walk away with emergency cash needed. In fact, some NBFCs are also open on Sundays and claim to give a higher percentage of loan against ornaments.

While banks would typically not give more than 75% of the gold value as loan, NBFCs' lending could go as high as 95% in case of high-purity gold. Gold loans are typically sanctioned against pledged gold ornaments. Based on its value, a personal loan is sanctioned on the basis of income and repayment capacity of the applicant.

The interest rate could depend on the tenure and amount of loan. It could vary from 12% to 18% in the case of banks, while for NBFCs, it could even go up to 24%, depending on the scheme you opt for.

There is no minimum period for the loan and, if need be, you can return the loan amount the very next day you took it.

PRABHAKAR MANI

PGDM 3 SEM

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